Real Estate Sales: How to Sell a House With a Mortgage

Real Estate Sales: How to Sell a House With a Mortgage

Perhaps you’ve received an offer for your dream job in another state. Or maybe you’re ready for a change and want to look for opportunities elsewhere.

Whatever your reason for moving, one thing worries you: the mortgage on your home you’re still paying for.

Fortunately, you’ve come to the right place. This guide discussing how to sell a house with a mortgage shares tips and tricks to help you get started, so read on.

Determine Your Outstanding Mortgage Balance

The first step to selling a home with a mortgage is knowing how much you still owe on it. Ideally, it should be less than what you sell the house for.

Let’s use the average U.S. household mortgage debt balance of $241,815 (as of the second quarter of 2023) as an example. To be eligible to sell your house with a mortgage, its sale price should be over $241,815. That way, the sales proceeds would be more than enough to pay off your remaining balance.

Find Out Your Home Equity

Your home equity is the value of your home less your outstanding mortgage balance. The more equity you have, the likelier you can sell your mortgaged home and even make some profit.

Suppose your house’s current market value is $550,000, but you still owe your mortgage lender $241,815. In this scenario, your home equity is $308,185.

Now, say that you find a buyer ready to purchase your house for $550,000.

If the sale pushes through, you can pay off the rest of your mortgage and “cash in” on your home equity. However, you may have to use part of your equity to pay off closing costs and other fees, such as contractor liens and back taxes. You can then pocket any remaining amount, save it, or use it as the down payment for your next home.

Check if Your Mortgage Is “Transferable”

Some types of mortgages are transferable or “assumable.” In this case, the original borrower (and now, the seller) can transfer their mortgage’s contract terms to a homebuyer.

A VA (Veterans Affairs) loan is one example of an assumable mortgage.

Low mortgage rates, transferable to new borrowers, give an assumable VA loan advantage over other home loan types. So, new homeowners save money as they’ll pay less in interest over the life of their assumed mortgage. Sellers may also make some profit by asking for a higher sales price.

So, before you sell your house with a mortgage the traditional way, see if your loan is assumable. Aside from VA mortgages, many FHA and USDA home loans are also transferable. Consider this route to attract a larger pool of prospective buyers and sell your home faster and for a higher price.

That’s How to Sell a House With a Mortgage

Now that you know how to sell a house with a mortgage, you can better prepare when selling yours. The most crucial thing here is to sell it for a price greater than your outstanding loan balance. This way, you won’t have to worry too much about paying the deficit out of pocket.

For more home and real estate guides like this, check out our other recent blog posts!